VEGAS INC coverage

Allegiant Air didn't announce many new Las Vegas routes last year, but the sixth busiest air carrier at McCarran International Airport still has big plans.

While the company has focused most of its recent growth on the East Coast, Allegiant also has been busy expanding its fleet, preparing to move into new corporate headquarters in Summerlin and staying profitable.

President and Chief Operating Officer Andrew Levy and Senior Vice President of Planning Jude Bricker recently spoke with VEGAS INC about the company's plans.

How did Allegiant do in 2013?

Bricker: It was really good. We’re experiencing the benefits of AirTran’s consolidation with Southwest, opening new opportunities for us. We’ve seen big year-over-year increases in the Appalachian area, upstate New York, eastern Pennsylvania and the Ohio River Valley. It’s actually a combination of things: the improved economy; a better job market, particularly in manufacturing; and more disposable income for travelers.

Levy: Geography played a role in it, too. There are a lot more markets that are suitable to our business plan in the East than in the West. The West is more sparsely populated, so there are more opportunities in the East.

How many cities does Allegiant serve?

Bricker: We’re now in 101 cities, including what we consider to be 15 destination markets. Las Vegas remains our biggest base, but Sanford (Orlando) is quickly catching up.

What's planned for 2014?

Bricker: We’re buying Airbus A320s for the East Coast and some A319s for our Phoenix-Mesa routes. The MD-80s are perfect for Las Vegas because we fly them just once or twice a week. So Las Vegas is where we use our MD-80s and 757s.

We expect to grow 15 to 20 percent in available seat miles, with most of that on the East Coast.

Levy: We’re really not looking for a whole lot of new aircraft this year, but if something becomes available, we’ll take a good look at it.

What’s on tap for Las Vegas?

Bricker: In October, the Wright Amendment expires (which restricts flights to Dallas’ Love Field). We don’t know what that will do exactly for us. We think Southwest may shift capacity of some small cities they serve, and some of those markets would be really good for us. We look at it as an opportunity to add capacity to cities where Southwest may be drawing down. If I had to guess, I’d think they’d fly a lot more Vegas and a lot more Orange County, Midway (Chicago) and Orlando.

Levy: It’s a wait-and-see approach. My sense is that some Southwest flights will go away, and there will be more non-stops out of Dallas. That could present some opportunities in places like Albuquerque, just as an example. Our best opportunities are to fly in some of these smaller cities where there’s no competition, where we can really offer a unique product rather than going to a place where Southwest has a presence, although we do that a little bit.

Bricker: We’ve also moved to the A gates at McCarran. That has helped our operation and really consolidated everything for us. It used to be a mile-and-a-half drive from our bag collection area to the D gates. Now, it’s really close. We also moved our maintenance facility to a location near the old international terminal. That helped consolidate our footprint and made us more efficient, and that drives down costs.

Why add Airbuses?

Bricker: In a dense configuration like we have, the key is to make the seats as slim as possible. You want it to be like a Herman Miller desk chair, just a diaphragm between you and the guy’s knees behind you. That affords us more space because we have to put as many seats in as we can, because our customers value our low fares the most. There are sections of the cabin that have a little more leg room that you can buy into, if that’s important to you. Seat assignments are a $60 million business for us.

But the ancillary fees bother many customers.

Bricker: We’re a purely ancillary product. If people want it, they can get it. If they don’t, they don’t have to. If you’re going to Hawaii for a week, you’re probably going to want to buy the ability to take luggage. That has absolutely nothing to do with the fare. The least effect it has on the fare, the more valuable it is to us.

Are you planning new fees?

Bricker: We’ve been very public about our desire to have a loyalty program. That will probably start for us with a credit card affiliation. We hope to launch one in 2014.

Our best opportunity now is to optimize what we have and do more bundling of fees to make it easier for a customer to get what he wants.

Will you offer Wi-Fi on your flights?

Bricker: We’re looking at it, but we’ve found that take rates are pretty low, maybe just 10 percent. That makes the economics a little hard to justify. We’re a leisure airline with point-to-point service, so you really aren’t on the airplane that long.

What about allowing cellphone calls during flights?

Bricker: We don’t have approval yet to operate any handheld personal electronic device on our airplanes after the doors close. We’d have to do the due diligence to show the Federal Aviation Administration that someone’s use of a personal electronic device would not interfere with the navigation systems, and we haven’t yet done that study. We intend to, but it’s a low priority.

Any plans for international flying?

Bricker: There are a couple of destinations that we’re really interested in: Cabo and Cancun in Mexico. Then, there’s Puerto Rico. We’re definitely serious about growing those as destination markets.

One of the challenges is having a source city for customers, and a lot of our source cities don’t have enough. We’ve requested route authority for Cabo-Vegas, and we’d love to launch that soon. We’ve also requested authority for Hermosillo to Las Vegas. Vegas has tremendous draw from the Canadian and the Mexican markets, both of which are within the range of our airplanes.

What’s the latest on negotiations with the Transportation Workers Union, which represents your flight attendants?

Levy: We made the last two proposals and the leadership rejected them without offering a counter-proposal, so we’ve kind of been waiting. The union is attempting to apply pressure through public relations and other avenues. The vast majority of flight attendants I’ve interacted with here and in other cities are largely annoyed by the tactic or indifferent to the issue. We think most of our employees are very happy. They come to work every day and they enjoy their jobs and we don’t have a lot of people leaving.

The process is ongoing with our pilots and the Teamsters union. We meet just about every month.

What’s the biggest issue separating the two sides?

Levy: It’s the collection of dues by the company and the agreement of the company to fire a person who chooses not to join the union or chooses not to pay their dues. In our opinion, that’s the No. 1 issue. They’ll say there are other issues that have not been agreed to, and that’s true, but we believe that the other things that have not been agreed to haven’t been because of the dues issue. We point out that the Strip has many properties that are unionized and many of them don’t have dues collection done by the company.

What benefits will your new headquarters in Summerlin offer?

Levy: It will be far less expensive for us. Our rent here (in a building on South Durango Drive) is comparatively high. But the main reason we’re leaving is we’re running out of space. The new place has enough space for now and for expansion, we hope, for the next 10 years.